ETF Fund Flows (Week Ending 1/4/08)

Our new report captures the largest creation/redemption activity in the ETF space.

Note: A number of readers wrote me last week to point out, correctly, that many ETF creations are done to facilitate short sales; that is, an institutional investor will create shares of an ETF so they can loan them out in the lucrative short-selling market. It's impossible to separate those creations from traditional "long" creations, but you can get a feel for it by examining the various funds on the list.

Largest Net Creations

Some interesting funds turn up on the top creation list for the week ending January 4, 2008. The iShares S&P 500 ETF (IVV) leads all funds with $813 million in new shares—which is especially interesting when you consider that its sister fund, the SPDR S&P 500 (SPY) had the largest number of shares redeemed for the week (over $9 billion).

Second on the creation list is the Vanguard REIT ETF (VNQ), with a surprising new creation surge worth $284 million. Short sales? Someone with a sudden love for real estate? You tell me.

After that, the UltraShort S&P 500 ProShares (SDS) shows up next on the creation list. Unlike other funds, there's no mistaking which way investors were betting there. (Shorting the UltraShort ProShares would be unusual, I think.)

The Market Vectors - Gold Miners ETF (GDX) appears on the list for the second time in two weeks, posting more than $100 million in creations for the second week running.

Top 20 ETFs By Creation Activity - Week Ending January 4, 2008
Fund	Ticker	Creations	Dollar Value
iShares S&P 500	IVV	5,750,000	$812,647,500
Vanguard REIT ETF	VNQ	5,002,020	$284,464,877
UltraShort S&P 500 ProShares	SDS	3,375,000	$196,323,750
Market Vectors Gold Miners	GDX	2,500,000	$124,525,000
iShares S&P GSCI Nat Res	IGE	900,000	$120,501,000
Retail HOLDRS	RTH	1,250,000	$109,400,000
Market Vectors-Agribusiness	MOO	1,900,000	$108,870,000
iShares Russell 1000 Growth	IWF	1,700,000	$99,331,000
iShares MSCI EAFE	EFA	1,200,000	$92,724,000
iShares Leh 1-3 Year Treas.	SHY	1,100,000	$90,805,000
Vanguard Total Bond	BND	1,100,000	$85,030,000
iShares MSCI Germany	EWG	2,400,000	$83,520,000
iShares S&P Global 100	IOO	1,000,000	$78,700,000
SPDR S&P Retail	XRT	2,300,000	$71,047,000
Vanguard Europe Pacific	VEA	1,503,540	$70,861,840
PowerShares DB Agriculture	DBA	2,000,000	$68,260,000
iShares Silver Trust	SLV	400,000	$60,552,000
iShares Russell 1000 Value	IWD	750,000	$58,230,000
Market Vectors Russia	RSX	1,100,000	$57,486,000
iShares Lehman TIPS	TIP	500,000	$53,390,000
Data from AMEX

Largest Net Redemptions

In terms of net redemptions, investors pulled nearly $10 billion out of SPDR S&P 500 (SPY) last week. They also made major redemptions in other broad market funds, such as the iShares Russell 2000 (IWM) and PowerShares QQQ Trust (QQQQ).

Beyond that, the Select Sector SPDR family shows up in force, with redemptions coming in the Financials, Industrials, Energy, Technology, Health Care and Consumer Discretionary ETFs.

Top 20 ETFs By Redemption Activity - Week Ending January 4, 2008
Fund	Ticker	Redemptions	Dollar Value
S&P 500 SPDR	SPY	(70,200,000)	($9,895,392,000)
iShares Russell 2000	IWM	(37,300,000)	($2,692,687,000)
PowerShares QQQ Trust	QQQQ	(30,550,000)	($1,475,259,500)
S&P 400 MidCap SPDR	MDY	(5,825,000)	($864,721,250)
iShares MSCI-Emerging Markets	EEM	(4,500,000)	($663,210,000)
DJIA DIAMONDS	DIA	(3,750,000)	($479,662,500)
Select Sector SPDR-Financial	XLF	(12,300,000)	($337,143,000)
iShares DJ US Real Estate	IYR	(4,350,000)	($266,872,500)
iShares Leh 20+ Year Treas.	TLT	(2,500,000)	($235,400,000)
Select Sector SPDR-Industrial	XLI	(5,150,000)	($193,640,000)
Oil Services HOLDRS	OIH	(1,009,400)	($189,333,158)
iShares FTSE/Xinhua China 25	FXI	(950,000)	($163,466,500)
Select Sector SPDR-Energy	XLE	(1,950,000)	($152,080,500)
iShares Russell 1000	IWB	(1,350,000)	($103,707,000)
Select Sector SPDR-Cons. Stpls	XLP	(2,950,000)	($82,747,500)
UltraShort QQQ ProShares	QID	(1,725,000)	($73,485,000)
Select sector SPDR-Technology	XLK	(2,800,000)	($70,140,000)
Select Sector SPDR-Health Care	XLV	(2,000,000)	($69,580,000)
Rydex S&P Equal Weight ETF	RSP	(1,499,650)	($67,334,285)
Select Sector SPDR-Cons Disc	XLY	(2,050,000)	($63,160,500)
Data from AMEX

Written by Matthew Hougan

Comments

[TheWongMan:]

Typically, participants will deliver the underlying securities of an ETF to create or receive underlying securities when redeeming. But does anyone know what ETF specialists deliver/create when create/redeem on an ultra short / long ETF?

2008 Jan 11 09:12 AM

[TheWongMan:]

Participants will deliver/receive the underlying securities of the ETF when creating/redeeming an ETF. Does anyone know what ETF specialists deliver/receive when they create/redeem on an ultra long/short ETF?
Thanks

2008 Jan 11 09:16 AM

[thinking ahead:]

I don't know. But here is my guess: the short is done with futures (or options when no future market exists), with the bulk of funds in tbills against possible drawdowns. My guess is based on the surprisingly large dividend that some of these short ETF's pay. Hopefully, somebody who knows the answer will tell both of us. Thanks in advance.

2008 Jan 11 10:02 AM